Newspaper article Coffs Coast Advocate (Coffs Harbour, Australia)

At Record Lows for Now; It's the Best Time for Home Owners to Ponder the Impact of Rate Rises on Their Finances

Newspaper article Coffs Coast Advocate (Coffs Harbour, Australia)

At Record Lows for Now; It's the Best Time for Home Owners to Ponder the Impact of Rate Rises on Their Finances

Article excerpt

Byline: Melissa Martin Melissa.Martin@coffscoastadvocate.com.au

WHILE no-one is exactly sure which way interest rates will move in the next few months, the reality is that at some stage in the foreseeable future rates will be above their current record lows.

So it may be timely for anyone with a mortgage to consider the impact of interest rate rises on their household finances and what action they can take now to manage that impact.

"Interest rates are at historic lows and there is widespread speculation as to where they will go from here," Smartline Personal Mortgage Advisers executive director Joe Sirianni said.

"Recent comments by the RBA indicate that the interest rate cut door is still slightly open, but money markets seem to think that it's more likely that they won't cut again.

"That means we are moving closer to the time when rates will start to rise again, particularly if the economy improves. For those who haven't already, now is the time to perhaps look at locking into a fixed rate and considering other ways of managing higher interest rates."

Mr Sirianni said when assessing an application for a home loan, banks factored in affordability at an interest rate 1.5-2% above the current rate to ensure that people don't get into financial stress if and when rates increase.

However, for those concerned about the potential impact of rising interest rates, Smartline suggests the following:

Consider fixing part or all of your home loan

"Indications are that it's a good time to fix interest rates if you haven't already," Mr Sirianni said.

"The long-term average variable rate in Australia is about 7%, so fixed rates below 5% really are attractive for most people."

Mr Sirianni said for those keen to pay off a significant portion of their loan in the next few years - which can be more difficult with a fixed loan - it might be worth considering fixing a portion and keeping the other portion at the variable rate.

"When considering the interest rate, make sure you look beyond the a[approximately]headline' rate and understand the comparison rate - this gives you a complete understanding of all the other fees and charges associated with the loan. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.